Today's Headlines

Bloomberg:

• U.S. Payrolls Grew 244,000 in April; Unemployment Jumps to 9%. American employers in April added more jobs than forecast and the labor market in the prior two months was stronger than initially estimated, indicating the world’s largest economy is weathering the impact of higher fuel prices. Payrolls expanded by 244,000 last month, the biggest gain since May 2010, after a revised 221,000 increase the prior month, the Labor Department said today in Washington. The jobless rate climbed to 9 percent, the first increase since November, a separate survey of households showed. Employment was forecast to grow by 185,000 last month, according to the median estimate of economists surveyed by Bloomberg News.
• Al-Qaeda Confirms Bin Laden's Death, Threatens Retaliatory Attack on U.S. Al-Qaeda confirmed the death of Osama bin Laden and threatened to retaliate “soon” against the U.S. Bin Laden’s blood “is too valuable to us and to every Muslim to let it go in vain,” said a statement attributed to al-Qaeda, dated May 3 and posted on websites that have carried confirmed jihadist statements in the past. “We will continue to hunt the Americans and their operatives inside and outside their country,” the group said. “Soon by God’s help, their happiness will be turned to grief and their tears will be mixed with their blood.”
• Bank Bond Risk Rises in Europe on Concern Recovery is Faltering. Financial companies led an increase in the cost of insuring European debt on concern an employment slowdown may add to evidence the recovery is faltering. The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 25 banks and insurers rose 2.5 basis points to 135, and the subordinated index was up 8 at 233.5, according to JPMorgan Chase & Co. at 10:30 a.m. in London. Sovereign risk also rose, with the Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbing 2 basis points to 192, according to CMA. Swaps on Spain jumped 10 basis points to 247, Portugal climbed 7.5 to 638.5, Ireland increased 7.5 to 660, Italy was up 6 at 155 and Greece rose 12.5 to 1,320.
• Silver Futures Head for Biggest Weekly Plunge Since 1975. Silver futures fell, heading for the biggest weekly plunge since at least 1975, on mounting sales by investors following increases in Comex margin requirements. This week, silver has tumbled 26 percent after CME Group Ltd., the Comex owner, boosted the cash amount needed for a speculative position by 84 percent in two weeks. Yesterday, holdings of the metal in exchange-traded products dropped the most in three years. “At the close of business on Monday, silver’s got another bump in margins,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. The minimum amount of cash that must be deposited when borrowing from brokers to trade will rise to $21,600 a contract after May 9, CME Group said on May 4. That’s an increase of $11,745 from two weeks ago. “The higher cash-margin requirements simply cannot be met by all participants, and when a trader can’t make margin, the underlying security is often liquidated,” Lachlan Shaw, a commodity analyst at Commonwealth Bank of Australia (CBA), said in a report. “Further silver price falls are possible.” Silver assets held in ETPs tumbled 3.6 percent to 14,546.99 metric tons yesterday, the biggest decline since Jan. 2, 2008, while gold holdings fell 0.7 percent to 2,057.08 tons, the biggest drop in three months, according to data compiled by Bloomberg.
• China Paying 'Close Attention' to U.S. Debate on Increasing Debt Ceiling. China, the biggest foreign holder of Treasury notes, is closely watching the debate over raising the U.S. debt ceiling and wants the Obama administration to do more to curb the deficit, Vice Finance Minister Zhu Guangyao said. “We are paying close attention to the domestic discussion in the U.S. on debt and deficits,” Zhu told reporters in Beijing today. “We hope the U.S. can take effective measures toward fiscal reorganization just as President Obama suggested.” His comments came days before about 30 top Chinese officials travel to Washington for an annual meeting on economic and military cooperation. Geithner has said the U.S. can borrow until Aug. 2 after reaching the $14.29 trillion debt limit this month. The U.S. has to take deficit-reduction measures “in order to improve the U.S. fiscal condition and to build a solid fiscal foundation for the long term sustainable growth of the U.S. economy,” Zhu said. China held $1.15 trillion in Treasuries as of the end of February, more than any other country. “Reduced U.S. fiscal spending may lead to a higher possibility of the U.S. dollar appreciation, therefore it helps China to maintain the value of the U.S. debt it holds,” said Li Jun, a Shanghai-based strategist at Central China Securities Holdings.
• Trichet's Dollar Comments Hint at Motivation for ECB Rate Move Restraint. The euro may have helped European Central Bank President Jean-Claude Trichet decide against a June interest-rate increase, economists said.
• Goldman(GS) BRIC Fund Among Most Hurt by 'Panic' Selling in Commodities Market. Emerging-markets funds managed by Goldman Sachs Group Inc. (GS) and Franklin Resources Inc. (BEN) were among the U.S.-registered mutual funds that fell the most in this week’s commodities selloff. The $831 million Goldman Sachs BRIC Fund (GBRAX) and the $825 million Templeton BRIC Fund (TABRX), which focus on Brazil, China, India and Russia, both dropped 5.7 percent in the week ended yesterday. The funds, from New York-based Goldman Sachs and Franklin Resources in San Mateo, California, were the biggest losers among diversified equity funds with more than $500 million in assets and at least 20 percent in energy or basic materials stocks, according to data compiled by Bloomberg. Commodities plunged yesterday as investors accelerated sales following year-to-date gains through April of more than 23 percent for silver, oil, gasoline and coffee. The Standard & Poor’s GSCI index of 24 commodities sank 6.5 percent in the biggest one-day drop since January 2009, bringing its loss this week to 9.9 percent. “It was a train wreck waiting to happen,” Michael Mullaney, portfolio manager at Boston-based Fiduciary Trust, said in a telephone interview. Speculation drove commodity prices well above reasonable levels, “and we are going to see it shake out some more before we get back to normal prices,” said Mullaney, who helps manage $9.5 billion.
• Syrians Take to Streets in Defiance of Army's Crackdown, Activist Arrests. Syrians staged protests in several cities today in defiance of an army crackdown in the southern region of Daraa and the arrest of hundreds of activists in the capital, Damascus. UN Secretary-General Ban Ki-Moon is dispatching an assessment team this weekend to check on the humanitarian needs in Daraa, scene of the most violence as Syrian President Bashar al-Assad has tried to crush opposition. Ban is sending the team after Assad agreed to permit it during their May 4 telephone call, according to UN spokesman Farhan Haq. Aid from Red Cross and Red Crescent began arriving in Daraa yesterday, he said. As many as 10 people were killed in Homs, Ammar Qurabi, head of Syria’s National Organization for Human Rights, said by phone. Snipers are on rooftops and seven tanks were deployed in the city, Razan Zaitouneh, a Damascus-based human-rights lawyer and activist, said on her Facebook page. Security forces fired live ammunition in Latakia and tear gas in Hama, she said. Al Arabiya, citing witnesses and activists, put the death toll at 15 in Homs and six in Hama. About 1,500 people gathered in the port city of Latakia, said Mahmoud Merhi, the head of the Arab Organization for Human Rights, in a phone interview from Syria.
• Restaurants Lift Prices as Inflation Hawks See Fed Behind Curve. Dining out will cost more this year as U.S. restaurants take advantage of the nearly two-year long expansion to boost prices on food and drinks. Higher-priced menus reflect growing confidence by eateries that consumers can afford to pay more to eat out. Restaurants are emboldened in part by the success of U.S. airlines, which have raised fares almost 10 percent since a year ago, according to Dean Maki, chief U.S. economist at Barclays Capital in New York. “The fact that the airline industry was able to pass along cost increases signals that the pricing environment has become somewhat more favorable than it was during the heart of the recession,” Maki said. “It’s more likely restaurants will be able to pass along price increases now relative to the last few years.”

Wall Street Journal:

• Portugal BES CEO Says Portugal Bailout Tough For Banks. Portugal's EUR78 billion bailout will be tough for banks, which will have to raise their capital ratios as part of the pact with the European Union and the International Monetary Fund, Banco Espirito Santo SA's (BES.LB) head said Friday. According to Chief Executive Ricardo Salgado, the bank wasn't expecting to be told to raise its Core Tier 1 ratio to 9% by the end of the year and 10% in 2012. "The justification they gave us was that Europe was heading toward a Core Tier 1 ratio of 10% under Basel III requirements," he said in a televised event. Portugal's main banks are all close to or above a Core Tier 1 of 8%. Under Portugal's EUR78 billion bailout, Portuguese banks will also have to meet deleveraging targets so they can reduce their reliance on funding from the European Central Bank. Of the package, EUR12 billion will be set aside for the banking system, in case institutions need help raising capital. Portugal's banks have been relying heavily on the ECB for liquidity, having borrowed EUR39.1 billion from the Bank in March. Loan-to-deposit ratios are on average around 150%. Contrary to Ireland, Portugal's banking system hasn't seen its lending portfolio deteriorate with the crisis, mostly because the real-estate sector never faced the boom and bust that other countries did. Instead its banks are suffering from liquidity constraints caused by uncertainty over Portugal's ability to pay its own debt.
• The New Class of Billionaires. Giant initial public offerings and a surge in mergers and acquisitions are spawning a new generation of billionaires and millionaires.
• Bipartisan 'Do Not Track' Bill Released.
• Environmental Suits Threaten Gulf Drilling. As oil and gas exploration in the western Gulf of Mexico resumes following the Deepwater Horizon oil spill, companies and federal regulators are facing a new reality: Environmentalists are gearing up for a legal fight. Though federal regulators have revamped safety regulations following the spill, environmental groups say they are not satisfied with the changes, signaling that even drilling plans approved under a new federal regime could face legal delays.

CNBC.com:

• Global 3D TV Market to Grow 5-Fold in 2011: iSuppli. The global 3D television market will grow more than 5-fold to account for 11 percent of flat-screen TV sales this year, as prices fall sharply and manufacturers add the function as an add-on feature, research firm IHS iSuppli predicted on Friday. It projected 3D TV shipments would rise to 23.4 million units this year from last year's 4.2 million units, gaining further to 159 million units in 2015. By that time, iSuppli said, 3D TVs would account for more than half of global flat-panel shipments.

Business Insider:

• Carl Levin: "No Doubt" Pakistani Officials Knew Where Bin Laden Was Hiding.
• Why Obama's Plan to Tax Cars By The Mile Is Wrong.
• Employee Costs Could Bankrupt San Francisco In Five Years: Mayor.
• Pakistan Arrests 40 In Abbottabad With Possible al-Qaeda Connections.
• Portfolio Manager on Goldman Sachs(GS): "We're One Headline Away From This Stock Getting Clobbered".
• Large Companies Stop Caring About The US Economy. (graph)
  

Zero Hedge:

• Deutsche Bank(DB) Put Volume Surges on Greek News.
• As People Not In Labor Force Hit New Record, Those Who "Want A Job Now" Jump By 232,000 In One Month. (graph)
• JPM Reports Global Economic Growth Slowest Since August 2009. (graph)
• Bill Gross Says May Change Mind On Shorting US Treasuries If Potential For Another Recession.
  

Insider Monkey:

• 10 Hedge Funds Hammered By The Decline in Commodities.

AppleInsider:

• Rumor: Apple(AAPL) Plans to Move Laptops From Intel(INTC) to ARM(ARMH) Processors.

Reuters:

• High-Frequency Aura Lifts a Year After US 'Flash Crash'.

Der Spiegel:

• Greece Considers Exit From Euro Zone. Athens Mulls Plans for New Currency. The debt crisis in Greece has taken on a dramatic new twist. Sources with information about the government's actions have informed SPIEGEL ONLINE that Athens is considering withdrawing from the euro zone. The common currency area's finance ministers and representatives of the European Commission are holding a secret crisis meeting in Luxembourg on Friday night. Greece's economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option: SPIEGEL ONLINE has obtained information from German government sources knowledgeable of the situation in Athens indicating that Papandreou's government is considering abandoning the euro and reintroducing its own currency. Alarmed by the attempt, the European Commission has called together a crisis meeting in Luxembourg on Friday night. In addition to Greece's possible flight from the currency union, a speedy restructuring of the country's debt also features on the agenda. One year after the Greek crisis broke out, the development represents a potentially existential turning point for the European monetary union -- regardless which variant is ultimately decided upon for dealing with Greece's massive troubles. Given the tense situation, the meeting in Luxembourg has been declared highly confidential, with only the euro zone finance ministers and senior staff members permitted to attend. Sources told SPIEGEL ONLINE that Schäuble intends to seek, however he can, to prevent Greece from leaving the euro zone. He will carry with him to the meeting in Luxembourg an internal paper prepared by the experts at his ministry warning of the possible dire consequences if Athens were to drop the euro. "It would lead to a considerable devaluation of the domestic currency against the euro," the paper states. According to German Finance Ministry estimates, the loss on exchange could be as high as 50 percent, leading to a drastic increase in Greek national debt. Schäuble's staff experts have calculated that Greece's national deficit would rise to 200 percent of gross domestic product after such a devaluation. "A debt restructuring would be inevitable," his experts warn in the paper. In other words: Greece would go bankrupt. It remains disputable whether it would even be legally possible for Greece to depart from the euro zone. Legal experts believe it would also be necessary for the country to split from the European Union entirely in order to abandon the common currency. At the same time, it is questionable whether other members of the currency union would actually refuse to accept a unilateral exit from the euro zone by the government in Athens. What is certain, according to the assessment of the German Finance Ministry, is that the measure would have a disastrous impact on the European economy. "The currency conversion would lead to capital flight," they write. And Greece might see itself as forced to implement controls on the transfer of capital to stop the flight of funds out of the country. "This could not be reconciled with the fundamental freedoms instilled in the European internal market," the paper states. In addition, the country would also be cut off from capital markets for years to come. In addition, the withdrawal of a country from the common currency union would "seriously damage faith in the functioning of the euro zone," the document continues. International investors would be forced to consider the possibility that further euro-zone members could withdraw in the future. "That would lead to contagion in the euro zone," the paper continues. Moreover, should Athens turn its back on the common currency zone, it would have serious implications for the already wobbly banking sector, particularly in Greece itself. The change in currency "would consume the entire capital base of the banking system and the country's banks would be abruptly insolvent." Banks outside of Greece would suffer as well. "Credit institutions in Germany and elsewhere would be confronted with considerable losses on their outstanding debts," the paper reads. The European Central Bank (ECB) would also feel the effects. The Frankfurt-based institution would be forced to "write down a significant portion of its claims as irrecoverable." In addition to its exposure to the banks, the ECB also owns large sums of Greek state bonds, which it has purchased in recent months. Officials at the Finance Ministry estimate the total to be worth at least €40 billion ($58 billion) "Given its 27 percent share of ECB capital, Germany would bear the majority of the losses," the paper reads.

Die Welt:

• Christian Lindner, General Secretary of Germany's Free Democratic Party, said the likelihood that Greece may have to restructure its debt is "only a question of time and conditions." Lindner, whose party is in coalition with Chancellor Angela Merkel's Christian Democrats, said creditors should first be asked to take a haircut on their bonds before any further aid is offered to euro-area states, citing an interview.

Market News International:

• European Central Bank council member Michael Bonello said policy makers take decisions on monetary policy "step by step." "The situation is surrounded by a lot of uncertainty," Bonello, who heads the central bank of Malta, told reporters. "Trying to predict things that far into the future is these uncertain times, I think would be foolhardy. It's just a matter of taking it month by month." He also said that he has "no idea" when the ECB will next start using the wording of "strong vigilance" on inflation risks, signaling a rate increase.

Times Live:

• US Drones Kill 17 in NW Pakistan; Protests Over Bin Laden. Four drones took part in the first such attack since US special forces killed the al Qaeda leader on Monday not far from Islamabad, further straining ties between the strategic allies whose cooperation is needed to stabilise neighbouring Afghanistan. Facing relentless suicide bombings by Islamic militants and struggling with a stagnant economy, Pakistan’s leaders now face criticism from all sides on bin Laden. Both Islamists and ordinary Pakistanis are questioning how their leaders can just stand by while the United States sends commandos deep inside the country into a garrison city to eliminate the al Qaeda chief. “The country’s political and military leadership should immediately resign as they have failed to ensure the country’s integrity,” said Fareed Ahmed Paracha, a senior leader of the biggest Islamist political party, Jamaat-e-Islami, at a rally in the eastern city of Lahore. About 1,500 Islamists demonstrated near the city of Quetta, capital of Baluchistan province in the southwest, saying more figures like bin Laden would arise to wage holy war against the United States. “Jihad (holy war) against America will not stop with the death of Osama,” Fazal Mohammad Baraich, a cleric, said amid shouts of “Down with America”. “Osama bin Laden is a shaheed (martyr). The blood of Osama will give birth to thousands of other Osamas.” In Abbottabad, where the US operation took place, dozens of Islamists marched through streets calling on the United States to stay out of Pakistan and Afghanistan. “America is the world’s biggest terrorist,” read one placard. Small protests were also held in the cities of Multan, Hyderabad and Abbottabad. Anti-American sentiment runs high here, despite billions of dollars in US aid for nuclear-armed, Pakistan. Pakistan has denied any knowledge of his whereabouts and the army threatened on Thursday to cut intelligence and military cooperation with the United States if it mounted more attacks.

Bear Radar

Style Underperformer:

• Small-Cap Value (+.27%)

Sector Underperformers:

• 1) REITs -.78% 2) Networking -.29% 3) Oil Service -.26%

Stocks Falling on Unusual Volume:

• VQ, MDRX, UPL, MBT, E, PZE, TIE, SAP, BRE, BMA, CHD, ARE, RCL, DB, CCL, TITN, ZINC, ZOLT, WBMD, TTMI, MFLX, PCLN, RBCN, NILE, SPRD, QLGC, MNTA, LINC, WIRE, KSWS, PFCB, RIMM, PENN, DWSN, XEC, EIG, WTW, KMX, DLB, WRC and TPC
  

Stocks With Unusual Put Option Activity:

• 1) EWT 2) SWK 3) ALU 4) CX 5) WHR
  

Stocks With Most Negative News Mentions:

• 1) LULU 2) PSA 3) GPS 4) YUM 5) GS
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume
  

Bull Radar

Style Outperformer:

• Small-Cap Growth (+1.59%)

Sector Outperformers:

• 1) Construction +3.06% 2) Coal +2.77% 3) HMOs +2.39%

Stocks Rising on Unusual Volume:

• ALJ, TSU, ELON, ROSE, TLEO, VIV, LGCY, HES, SAPE, HANS, MOBI, WCRX, ARMH, ONXX, LXU, BKS, TTI, FLR, WCG, AREX, CF, MHK, TBL, EOG, CENX, MRX, UCO, SM, SUN, SGEN, FNB, ONNN, JCOM, NRP, SFSF, XOP, EZA, RTI, BKF and LRCX
  

Stocks With Unusual Call Option Activity:

• 1) SVNT 2) WMB 3) CI 4) A 5) RBCN
  

Stocks With Most Positive News Mentions:

• 1) MAR 2) CXO 3) CTB 4) RBCN 5) CI

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume
  

Friday Watch

Evening Headlines
Bloomberg:

• Oil Trades Near Two-Month Low, Heads for Biggest Weekly Decline in a Year. Oil traded near the lowest in almost two months in New York and headed for the biggest weekly drop in a year as a surprise increase in U.S. jobless claims added to signs of slower growth in the world’s largest crude consumer. Futures were 0.2 percent lower after declining 8.6 percent yesterday, the biggest fall in more than two years. U.S unemployment claims rose the most since August and German factory orders slipped. “The spike in weekly jobless claims and the drop in German factory orders follow a series of weak economic data,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The ECB is stepping back from tightening, which is ending the commodity inflation trade. This is a significant recasting of the environment.” Prices are down 12.6 percent this week, the most since the week ended May 7, 2010, and are 29 percent higher the past year. Brent crude oil for June settlement plunged $10.39, or 8.6 percent, to $110.80 a barrel, the lowest since March 16, on the London-based ICE Futures Europe exchange yesterday.
  
• Trichet's ECB Rate Signal Just a Respite for Indebted Nations: Euro Credit. Jean-Claude Trichet’s signal that the European Central Bank will hold off raising interest rates next month may provide only a respite for distressed euro nations grappling with anemic growth and demands to cut their debt. The ECB president indicated that the bank will wait until after June to raise rates for a second time this year after the ECB left its benchmark rate at 1.25 percent yesterday. The prospect of rising borrowing costs underscored Europe’s economic divide and political tensions over bailouts. While the ECB’s decision wrong-footed some investors who had expected a quicker move to fight accelerating inflation, the euro region’s most indebted countries are being squeezed by rate increases and a strengthening euro. “The periphery’s weak cyclical outlook, poor earnings prospects for workers -- especially in real terms -- and tighter credit conditions will jointly amplify the restrictive impact of rising interest rates,” said Vladimir Pillonca, an economist at Societe Generale SA in London. “Greece, Portugal, Ireland and structurally weak economies such as Italy are likely to suffer disproportionately.” Greece is in its third year of recession and its two-year notes yield more than 25 percent. Portugal yesterday cut its 2011 forecast, saying the economy will shrink 2 percent. Ireland and Italy last month both scaled back their forecasts for this year, respectively to 0.75 percent and 1.1 percent, while Spain expects 1.3 percent growth. A year of crisis management hasn’t worked and “it’s a question of time before a default will happen” in Greece, Timo Soini, head of Finland’s euro-skeptic True Finns party, told Bloomberg Television. He indicated the party, which rocketed to third place in elections last month, will use its status in the future government to oppose strengthening Europe’s rescue fund. European voters are now saying “we have had enough of the transfer of risk and debt from the private sector to the public sector,” said Irwin Stelzer, an economist at the Washington- based Hudson Institute, a research center. “The whole theory of the euro zone is a kind relief of democratic pressures; you do things in committees and the electorate isn’t really involved. That game is over.” Variable-rate mortgages account for almost 100 percent of new lending in Portugal and about 85 percent in Spain, compared with 15 percent in Germany, according to the Brussels-based European Mortgage Federation. In Ireland, 85 percent of outstanding loans track market rates. “Consumers in the periphery, already under pressure from consolidation efforts, will increasingly feel the impact of rate hikes, especially since Portugal, Ireland and Spain are among the euro-area countries with the highest share of variable-rate mortgages,” said Nick Matthews, a senior European economist at Royal Bank of Scotland Plc in London.
• Asia Inflation Fight Spreads on Philippines, Malaysia Rate Moves. The Philippines and Malaysia joined India and Vietnam in raising interest rates this week as nations in a region that led the global economic recovery intensified their fight against inflation. Bangko Sentral ng Pilipinas yesterday increased the rate it pays lenders for overnight deposits to 4.5 percent from 4.25 percent in its second move this year, while Bank Negara Malaysia lifted the benchmark overnight policy rate for the first time in 2011, boosting it by a quarter point to 3 percent. Surging food and oil costs are escalating the danger of inflation in Asia, prompting policy makers to accelerate monetary tightening even at the risk of slowing growth. India on May 3 doubled the magnitude of rate increases and the State Bank of Vietnam raised borrowing costs the following day for the fifth time in 2011. “The bigger picture is that inflation still remains quite an issue around the region,” said Wellian Wiranto, an economist at HSBC Holdings Plc in Singapore. “Inflation risk still trumps growth risk as you can see from the central bank thinking.” Asia faces a “serious setback” from surging inflation that threatens to push millions into extreme poverty, the Asian Development Bank said last week.
• Kraft(KFT) Foods Lowers Full-Year Profit Forecast, Citing Commodity Costs. Kraft Foods Inc. (KFT), the world’s second- largest food company, lowered its full-year earnings forecast because of the loss of the Starbucks Corp. (SBUX) distribution business and surging commodity costs. Profit, excluding items such as integration costs, will be at least $2.20 a share, Northfield, Illinois-based Kraft said today in a statement. That compares with a prediction of at least $2.24 in February. Analysts on average project $2.23, according to a Bloomberg survey.
• JPMorgan Chase(JPM) Said to Be Subpoenaed by SEC Over Mortgage Debt Documents. JPMorgan Chase & Co. (JPM) was subpoenaed by the U.S. Securities and Exchange Commission over failed mortgages, a person familiar with the investigation said, as the agency probes banks sued for allegedly boosting their profits by failing to share refunds from sellers of faulty debt.
• SEC Subpoena Credit Suisse Over Mortgages: MBIA. The U.S. Securities and Exchange Commission subpoenaed Credit Suisse Group AG (CSGN) seeking documents related to mortgage debt, bond insurer MBIA Insurance Corp. said in a court filing as it seeks information as part of a lawsuit against three of the bank’s units. “Credit Suisse is now the subject of an investigation by the Securities and Exchange Commission, which issued a subpoena this week seeking the same types of documents as MBIA seeks with this motion,” the bond insurance unit of Armonk, New York-based MBIA Inc. (MBI), said in the filing in New York State Supreme Court.
• Republican Senators to Block Consumer Nominee Absent Changes. U.S. Republican senators told President Barack Obama they have enough votes to block any nominee for the Consumer Financial Protection Bureau unless Democrats agree to change the agency’s structure and funding. The warning, delivered in a letter to the White House, adds to the uncertainty surrounding the agency, which was included in the Dodd-Frank financial-regulation overhaul last year over the objections of Republican lawmakers and financial industry lobbyists. Forty-four Republican senators, led by Richard Shelby, the ranking Republican on the Banking Committee, signed the May 2 letter made public today. They wrote that they want the agency’s director to be replaced by a board of directors, its funding brought under congressional control and its operations subject to increased oversight from other banking regulators. “No person should have the unfettered authority presently granted to the director of the Consumer Financial Protection Bureau,” the signees, which include Minority Leader Mitch McConnell, wrote. “Therefore, we believe that the Senate should not consider any nominee to be CFPB director until the CFPB is properly reformed.”
• Bank of America(BAC) Raises Range of Possible Legal, Regulatory Costs. Bank of America Corp. (BAC), the lender facing lawsuits and probes by state attorneys general tied to its mortgage business, increased its estimate for costs that may result from legal complaints and regulatory matters. Losses may range from $150 million to $1.6 billion in excess of accrued liability, the Charlotte, North Carolina-based company said today in a regulatory filing that covered the first quarter of this year. The range cited after the fourth quarter of 2010 was $145 million to $1.5 billion.
• U.S. Will Push China to Let Yuan Strengthen at Faster Pace. U.S. officials will press their Chinese counterparts at a meeting next week to let the yuan strengthen more rapidly, a Treasury Department official said. “We are going to press China to let its exchange rate adjust at a faster pace to correct its still-substantial undervaluation,” David Loevinger, the Treasury’s senior coordinator for China, told reporters in Washington today. “China continues to intervene massively in foreign-exchange markets to constrain the appreciation of its currency.”
• Copper may fall on concern demand will weaken as stockpiles increase and China, the world's biggest consumer of the metal, moves to curb inflation, a survey showed. Seven of 14 analysts, investors and traders surveyed by Bloomberg, or 50%, said prices will drop next week. Five predicted a gain and two forecast little change.
• Rubber Plunges on Concern Global Economic Slowdown May Cut Demand. Rubber declined to its lowest level in seven weeks, in line with losses across commodities markets, amid concerns that slowing economic growth in the U.S. and high prices may reduce demand for the commodity used in tires. The October-delivery contract lost as much as 8.7% to 353.2 yen a kilogram on the Tokyo Commodity Exchange, the lowest since March 16th.
• Hong Kong Stocks Drop in Longest Streak Since SARS, Iraq War. Hong Kong stocks fell for an eighth day, the longest stretch of losses since the 2003 spread of severe acute respiratory syndrome and the U.S. invasion of Iraq, as economic reports in America and falling commodity prices damped investor confidence in the global recovery. “There’s been a decline in sentiment,” said Peter Elston, a strategist at Aberdeen Asset Management Plc, which oversees about $282 billion. “Fears of the U.S. economy grew yesterday. I haven’t been convinced by these recoveries in the developed world as I just see them being driven by stimulus and the major structural trend is one of deleveraging.”
• Goldman Sachs(GS) Chief Blankfein Faces Shareholders Amid 'Lingering Problems'. Lloyd C. Blankfein, chief executive officer of Goldman Sachs Group Inc. (GS), has sought to quell shareholder concerns about its bonuses and business practices at the past two annual meetings. Today, he will try again. As the fifth-biggest U.S. bank by assets hosts investors for the first time at its building in Jersey City, New Jersey, shareholders are still questioning Goldman Sachs’s actions during the financial crisis, executive pay and business model.

Wall Street Journal:

• Egypt Front-Runner Seeks Reset With Israel. The leading candidate in Egypt's presidential race said that if he was elected he would break with former President Hosni Mubarak's reliably amenable policies toward Israel. Amr Moussa, the 74-year-old outgoing head of the Arab League, said the former regime's attempts to resolve the Palestinian-Israeli conflict had "led nowhere" and that Egypt now needs policies that "reflect the consensus of the people." Mr. Moussa, in an interview with The Wall Street Journal, also described a political landscape in which the Muslim Brotherhood, outlawed under Mr. Mubarak, is dominant. It is inevitable, he said, that parliamentary elections in September will usher in a legislature led by a bloc of Islamists, with the Brotherhood at the forefront. If Mr. Moussa, who was Mr. Mubarak's foreign minister from 1991 to 2001, is elected, he is likely to accelerate shifts in Egypt's foreign policy that have already vexed the U.S. and Israel. Since massive demonstrations overthrew Mr. Mubarak's regime in February, the new military-led government has negotiated a power-sharing deal between the Palestinian Authority and the militant Islamist party Hamas, pledged to work toward normalizing estranged relations with Iran, and announced plans to permanently open Egypt's border with the blockaded Gaza Strip, against protests from neighboring Israel. Under Mr. Mubarak, Egypt was arguably Washington's closest political partner in the Arab world. While following the American line in its policies toward Israel, the Palestinians and Iran brought benefits, it also cost Egypt its once muscular diplomatic influence in a region that is now witnessing its most profound political change in more than a generation. In a recent poll by the Pew Research Center, 89% of Egyptians said they had a positive impression of Mr. Moussa—far ahead of competitors such as Ayman Nour, of whom 70% approved. Mohammed ElBaradei, the Nobel Peace laureate, rated 57% approval.
• Al-Qaeda Sought to Target U.S. Train Network. A set of handwritten notes picked up by the Navy SEALs who killed Osama bin Laden prompted the government to warn of potential al Qaeda threats to the U.S. train network, the first known use of intelligence gleaned from the raid. In an "intelligence message," the Department of Homeland Security alerted law-enforcement officials that initial analysis of evidence seized from bin Laden's compound shows al Qaeda hoped to attack trains in the U.S., possibly on the anniversary of the Sept. 11 attacks. According to the DHS bulletin, the terror group in early 2010 envisioned sabotaging a railway to cause a wreck. DHS said it isn't clear if there has been any further planning since February 2010.
• Bin Laden's Widow Says Pakistan Home Was Base for 5 Years. Osama bin Laden's youngest widow has told Pakistani investigators the al Qaeda leader and his family had been living in the compound where he was killed for the past five years, said a senior Pakistani intelligence official. His account of her testimony offers some of the strongest evidence so far of how long the world's most-wanted man had been living in Abbottabad, and in what circumstances, as well as some fresh insight into what happened during and immediately after the raid.
• CVS Caremark(CVS) Got SEC Subpoena In February Over 2009 Disclosures. CVS Caremark Corp. disclosed that it received a Securities and Exchange Commission subpoena at the end of February seeking information about public disclosures it made in 2009 in relation to its struggling Caremark pharmacy-benefits-management division and its Medicare Part D business, as well as information about ownership and transactions in CVS securities by certain company officers.
• Probe Eyes Trades by Fund Titan. Prosecutors are examining trades made in an account overseen by hedge-fund titan Steven Cohen that were suggested by two of his former fund managers who have pleaded guilty to insider trading. The development surfaced in court filings submitted in connection with a sweeping insider-trading investigation, which focuses on ways traders can receive nonpublic information from experts connected to industries or firms.
• Schumer Tilts Toward Offer by Germans for Big Board. Sen. Charles Schumer (D-NY) — Wall Street's strongest Washington ally and a target of arm-twisting in the battle for the New York Stock Exchange—hasn't taken a public position on the competing bids for its parent company. But behind the scenes, according to people who have spoken to him, he is leaning toward a surprising choice as a merger partner: the Germans.
• Is the Chinese Listing Bubble Going Bust? Suddenly the boom in Chinese listings on U.S. exchanges is looking shaky, and two primary reasons were reinforced in separate developments today. On Wall Street, Renren, dubbed the Chinese Facebook, tanked after its shares debuted at a stratospheric multiple on Wednesday, calling into question the appetite for future Chinese IPOs. Meanwhile, at a New York City financial conference, SEC officials were nearly elbowing each other out of the way to express their concerns about reverse mergers that are allowing Chinese firms to back door their way into U.S. markets.
• The Waterboarding Trail to Bin Laden. Former CIA Director Michael Hayden said that as late as 2006 fully half of the government's knowledge about the structure and activities of al Qaeda came from harsh interrogations.

MarketWatch:

• Australia's RBA Flags More Rate Hikes. The Reserve Bank of Australia said Friday that it expects further monetary-policy tightening will be required in the future in order to keep inflation within target.

CNBC:

• Carlyle Faces Questions Over China Investments. Carlyle, the US private equity group, is facing questions over its investments in two Chinese companies that have been accused of fraud and suspended from trading on stock exchanges in Hong Kong and New York. China Forestry, a Hong Kong-listed plantation operator in which Carlyle has an 11 percent stake, and China Agritech(CAGC), a Nasdaq-listed fertiliser maker in which Carlyle has a 22 percent stake, have both had their shares suspended from trading in recent months. “To paraphrase Oscar Wilde, to make one duff investment might be regarded as misfortune, but to make two smacks of carelessness,” said David Webb, a Hong Kong-based corporate governance activist.

Business Insider:

• John Paulson's Biggest Fund Down in 2011.
• GaveKal's 5 Reasons Why Commodities Are Suddenly Tanking.
  

Zero Hedge:

• Nymex Oil, Natgas Contracts Hit Record Open Interest.

NY Times:

• Ending Run, Investors Abandon Commodities.

Forbes:

• As Predicted in December, Commodity Bubble is Popping. After keeping interest rates near 0% for years, the amount of free debt flying around is exceptionally high. And rather than funelling the cash into job-creating businesses, traders have been using the money to buy commodities futures contracts while selling short the dollar. This trade has done a marvelous job of driving up those prices well beyond what would make sense if prices were set solely on the basis of supply and demand for the commodity. As with previous bubbles over the last three decades, the commodities bubble has been financed by excessive borrowing. For example, to control a $100 commodities contract, a trader is required to put down $6 of his own capital to $94 worth of debt. In March, I suggested that the quickest way to accelerate the popping of the commodities bubble would be for regulators to raise the so-called margin requirements for traders from $6,000 per contract to perhaps $12,000.

CNN Money:

• Your Monthly Gasoline Bill: $368. Round-trip airfare from New York to Los Angeles. More than a dozen dinners for two at Applebee's. Two 16 GB iPod nanos. These are just a few of the things you could have bought if you weren't spending $368.09 a month on gasoline. That's the average amount American households spent on gas in April, according to an exclusive analysis of data by the Oil Price Information Service for CNNMoney. The study, which compared average gas prices with median incomes nationwide, also showed that U.S. households spent nearly 9% of their total income on gas last month. That's more than double what the average American family spent just two years ago, when gas prices were hovering around $2.05 a gallon. After surging nearly 30% this year, the national average price for regular gasoline is less than 2 cents away from $4 a gallon. That's still below the all-time high of $4.114, but prices in many parts of the country have already risen to new records well above that level.

The Blaze:

• Obama Walks Away From 9/11 Family Member Who Asks About Investigation of CIA Interrogators. (video)

Politico:

• House Votes to Expedite Offshore Oil and Gas Drilling Leases. The House on Thursday fired the latest shot in the Washington war over gasoline prices, easily passing a GOP plan to expedite offshore oil and gas drilling leases. Nearly three dozen Democrats signed on to a bill from House Natural Resources Committee Chairman Doc Hastings (R-Wash.) that would expedite lease sales in the Gulf of Mexico and off the Virginia coast that have been delayed or canceled since last year’s BP oil spill disaster. Still, that probably won’t spur any action in the Senate or break the overall partisan gridlock on soaring gas prices.

USA Today:

• Silver Slides Into a Bear Market. The price of silver collapsed for the fourth-consecutive day, falling a brutal 8% Thursday to $36.23 an ounce. Silver lost 25% of its value in just four days after hitting a peak of $48.58 last week. That's the metal's biggest four-day decline since 1983, Bloomberg News says. Silver now finds itself in a crushing bear market that's not showing any signs of relenting. A 20% decline from a market high is the unofficial definition of a bear market. Silver's crash "is relentless," says Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital, who called for a correction months ago. "To see (the size of) this correction … it's unreal," he says.
• Retailers Say Gas Prices Are Starting to Take a Bite Out of Sales. Some stores that cater to low-income shoppers are starting to warn that their customers are facing pressure from high gas prices.

Reuters:

• At Least 25 Hacked to Death in Guinea Ethnic Clashes - Sources. At least 25 people were killed in ethnic clashes in south eastern Guinea, many hacked to death with machetes, sources said on Thursday. "We have sent reinforcements and a government official native to the area is on his way to help calm the situation," a police official told Reuters on condition of anonymity. He said at least 25 people were killed. The clashes in the village of Galapaye, about 100 km (60 miles) south of N'Zerekore and 1,000 km from the capital Conakry, began on Monday between members of the largely Christian Guerze group and the mostly Muslim Malinke tribe.
• US Targets Bankers in HSBC Laundering Probe - Source. The Justice Department's money-laundering probe against banking giant HSBC Holdings Plc is looking at possible prosecution of individual bankers, a source close to the investigation said on Thursday.
• Sony(SNE) Shares Fall More Than 4% after 2nd Data Security Breach. Shares of Sony Corp fell more than 4 percent after the company revealed hackers had stolen data on another 25 million users of its PC games system in a second massive security breach for the consumer electronics giant.
• Visa(V) Profit Rises, But Regulations Weigh. Visa Inc's quarterly profit rose more than expected as increasingly confident consumers spent more, but doubts remain about the payments network's ability to grow under looming regulation. Shares fell in after-hours trading, as Visa failed to beat expectations by the wide margins investors were once used to.
• Priceline(PCLN) Profit Rises on Bookings Growth. Online travel agency Priceline.com posted a quarterly profit on Thursday that topped expectations on surging travel bookings.
• AIG(AIG) Posts Ongoing Loss On Debt, Quake Charges. Bailed-out insurer American International Group lost more than $1 billion from its ongoing operations in the first quarter, as the company took a huge charge for the termination of its credit facility with the Federal Reserve.
• Equity ETFs Dominate Inflows, Munis Lose - Lipper.
  

Telegraph:

• Bank of England Holds Interest Rates as UK Economy Suffers Biggest Drop in Growth Since Lehman Collapse.

ABS CBNnews.com:

• Putin Accuses Oil Firms of Gasoline Price Fixing. Russian Prime Minister Vladimir Putin accused oil companies on Thursday of a "conspiracy" to force up gasoline prices, as the world's largest oil producer struggles to combat fuel shortages. Putin rebuked Deputy Prime Minister Igor Sechin, his point man for energy, for suggesting at a government meeting that price rises had resulted from a lack of oil products offered for sale on commodities exchanges. "It's not a shortage. This is not about a shortage. This is a conspiracy. They are colluding," Putin told Sechin, who serves on the board of state-controlled oil major Rosneft and is widely seen as the chief spokesman for the industry. The government last week raised gasoline export duties by 44 percent to keep fuel in the domestic market after pumps ran dry in some regions and shortages spread to Moscow and St Petersburg. Sechin has chaired talks to discuss proposed amendments to oil tax reforms that would ramp up export duties on refined products to punitive levels if crude oil prices are high. Analysts blame the shortages on price curbs demanded by Putin from industry bosses in February, and a lack of investment in the refinery capacity needed to produce the premium fuel used by Russia's growing fleet of modern cars. Fuel prices are the latest driver of inflation that is close to double digits. Gasoline prices rose by 2.8 percent last week, their biggest jump in 14 weeks, data showed on Thursday.

Kyodo News:

• Toyota Motor Corp.(TM) sold 48,700 new vehicles in China last month, down 23.5% from a year earlier, citing the company.

Xinhua:

• The Chinese Academy of Social Sciences called for the real estate tax introduced in Chongqing and Shanghai to be extended nationwide over five years, citing a report from the research group. The tax will create a sustainable source of local-government revenue, curb increases in real-estate prices and help narrow the income gap between rich and poor, according to the report.
• The director of China's electricity regulator said the nation is able to make short term increases in on-grid power prices as part of efforts to reduce supply shortages, citing Tan Rongyao, director of the States Electricity Regulatory Commission.
  

Shanghai Daily:

• 6 Chinese IT Firms Plan IPOs for U.S.

China Securities Journal:

• The growth of China's textile and clothing exports may slow this year to about 15% from 24% in 2010 because of rising costs, the appreciation of the yuan and tight monetary policy, citing webtextiles.com analyst Wang Qianjin.

21st Century Business Herald:

• China Banking Regulatory Commission warns rural cooperatives of risks from dairy companies' lending, citing people from various rural cooperatives.

Economic Observer:

• China's April vehicle sales may have dropped about 5% from March's 1.83 million units sold, citing China Automobile Dealers Association deputy director Su Hui.

Wen Wei Po:

• China lacks a long-term housing development plan, citing Li Jing, a researcher at the Chinese Academy of Social Sciences.

Evening Recommendations
Citigroup:

• Reiterated Buy on (PCLN), boosted target to $650.

Capstone:

• Rated (GOOG) Buy, target $626.

Night Trading

• Asian equity indices are -1.50% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 108.50 +2.0 basis points.
  
• Asia Pacific Sovereign CDS Index 115.0 +1.0 basis point.
  
• S&P 500 futures -.06%.
  
• NASDAQ 100 futures -.16%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CHD)/1.14
• (CEG)/.96
• (ZEUS)/.38
• (SUP)/.47
• (WCRX)/.82
• (WCG)/.16
  

Economic Releases
8:30 am EST

• The Change in Non-Farm Payrolls for April is estimated at 185K versus 216K in March.
• The Change in Private Payrolls for April is estimated at 200K versus 230K in March.
• The Unemployment Rate for April is estimated at 8.8% versus 8.8% in March.
  
• Average Hourly Earnings for April are estimated to rise +.2% versus unch. in March.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The (AGL) analyst day and the (AER) investor meeting could also impact trading today.
  

BOTTOM LINE: Asian indices are lower, weighed down by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Lower into Final Hour on Commodities Plunge, Forced Selling, Global Growth Concerns, Emerging Markets Inflation Fears

Broad Market Tone:

• Advance/Decline Line: Lower
  
• Sector Performance: Most Sectors Declining
  
• Volume: Above Average
  
• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• VIX 18.14 +6.21%
  
• ISE Sentiment Index 111.0 +14.43%
  
• Total Put/Call 1.01 unch.
  
• NYSE Arms 1.75 +23.63%
  

Credit Investor Angst:

• North American Investment Grade CDS Index 90.50 +.63%
  
• European Financial Sector CDS Index 87.92 +4.14%
  
• Western Europe Sovereign Debt CDS Index 186.58 +.36%
  
• Emerging Market CDS Index 206.26 +2.42%
  
• 2-Year Swap Spread 18.0 +1 bp
  
• TED Spread 26.0 unch.
  

Economic Gauges:

• 3-Month T-Bill Yield .00% -2 bps
  
• Yield Curve 258.0 -5 bps
  
• China Import Iron Ore Spot $182.50/Metric Tonne -.44%
  
• Citi US Economic Surprise Index -26.70 -6.4 points
  
• 10-Year TIPS Spread 2.48% -7 bps
  

Overseas Futures:

• Nikkei Futures: Indicating -300 open in Japan
• DAX Futures: Indicating -8 open in Germany

Portfolio:

• Slightly Higher: On gains in my Medical/Retail sector longs, ETF hedges and emerging market shorts
  
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short
  
• Market Exposure: Moved to 50% Net Long

BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades at session lows despite falling energy/food prices, a stronger dollar and lower long-term rates. On the positive side, Defense, Oil Tanker, Semi, Networking, Hospital, HMO, Gaming, Education, Road & Rail and Airline shares are higher on the day. Small-caps are outperforming. The US dollar looks to have made a tradable low. The UBS-Bloomberg Ag Spot Index is falling -2.34%, gold is down -3.1% and oil is plunging -9.2%. Silver has crashed about -28% in 6 days. The 10-year yield is falling -6 bps to 3.16%. The US Muni CDS Index is is falling -2.4% to 122.88 bps. The AAII % Bulls fell to 35.46 this week, while the % Bears rose to 31.87, which is a mild positive. On the negative side, Coal, Energy, Oil Service, Telecom, Bank and Insurance shares are under significant pressure, falling more than -1.5%. Commodity-related equities have traded very heavy throughout the day again. The US price for a gallon of gas is rising .01/gallon today to $3.99/gallon. It is up .87/gallon in 79 days. Lumber is falling another -.6% and has plunged around -28.0% in just over 2 months. Copper is dropping -3.83% and is sitting right below its 200-day moving average. The Spain sovereign cds is jumping +4.37% to 236.56 bps, the Italy sovereign cds is climbing +3.69% to 149.33 bps, the Greece sovereign cds is surging +8.2% to 1,389.96 bps, the Belgium sovereign cds is gaining +3.07% to 139.83 bps and the UK sovereign cds is rising +3.95% to 58.33 bps. Moreover, the Illinois Municipal CDS is soaring +15.91% to 190.0 bps. I continue to believe the global economy is slowing more than economists expect on soaring food/energy prices, US housing, European austerity, central bank tightening in emerging markets and the Japan nuclear crisis. The huge declines in commodities and rise in the US dollar today, while a short-term broad market negative, should help provide the catalyst for further stock gains later this year if the trends continue as long as global growth doesn't slow too much. Usually, leadership changes are messy and more forced selling is likely over the coming weeks as many funds were heavily-weighted long commodity-related securities. I expect US stocks to trade mixed-to-lower into the close from current levels on profit taking, more shorting, technical selling, global growth concerns, Mideast unrest, commodity sector weakness and emerging markets inflation fears.

Bear Radar

Style Underperformer:

• Large-Cap Value (-.66%)

Sector Underperformers:

• 1) Gold & Silver -3.25% 2) Coal -2.40% 3) Energy -1.81%

Stocks Falling on Unusual Volume:

• PVA, SGY, LGCY, SU, SWC, IVN, TEF, WFR, KTOS, BCSI, DXCM, RSTI, DGIT, MSTR, ACOR, WMGI, BEXP, ANDE, CELG, PEGA, LINE, AIXG, NILE, HEES, ROSE, BBBB, MICC, CSGS, TBL, KWR, SAM, XRM, EWU, ARO, SPH, MTD, GDX, WIN, CXO, JCP, THS, VMC, KRA, NTSP, AVP, GORO, WMGI, DBC, GDP, MUR, GDOT, NOG, IO, SSI, USO, SLV, DGIT, ORA and UCO
  

Stocks With Unusual Put Option Activity:

• 1) CAM 2) ARO 3) OMX 4) XLV 5) USO
  

Stocks With Most Negative News Mentions:

• 1) SNE 2) GM 3) SFD 4) PSS 5) GDOT
  

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume